Competing Interests in an I.P.O.

When it comes to hot initial public offerings, there is a long-running debate over the obligations of the underwriter. In one classic case, the 1999 I.P.O. of eToys, a cache of documents newly unearthed by Joe Nocera of The New York Times offers insight into the way one Wall Street firm, Goldman Sachs, has approached these deals. In a lawsuit that is still going on, lawyers for an eToys creditors’ committee claimed that Goldman purposely set a low price to create a first-day pop in the stock for institutional investors, at the expense of the company itself.

The newly discovered documents show “that Goldman knew exactly what it was doing when it underpriced the eToys I.P.O. â€" and many others as well,” Mr. Nocera writes in his column. “Taken in their entirety, the e-mails and internal reports show Goldman tok advantage of naïve Internet start-ups to fatten its own bottom line.”

“Goldman carefully calculated the first-day gains reaped by its investment clients. After compiling the numbers in something it called a trade-up report, the Goldman sales force would call on clients, show them how much they had made from Goldman’s I.P.O.’s and demand that they reward Goldman with increased business. It was not unusual for Goldman sales representatives to ask that 30 to 50 percent of the first-day profits be returned to Goldman via commissions, according to depositions given in the case.”

Goldman, for its part, says that it “did not engage in quid pro quos for allocation of hot I.P.O.’s, and none of the decade-old documents distorted by the eToys litigants suggests otherwise.” Mr. Nocera has posted the documents online. Felix Salmon of Reuters, who looked through the documents, writes: “Goldman likely made much much more money on the eToys I.P.O. from its buy-side clients than it did from eToys itself.”

CALLAN AFTER LEHMAN  |  Erin Callan, a former chief financial officer of Lehman Brothers, has largely kept to herself since leaving Wall Street during the financial crisis. But Ms. Callan has a new opinion essay in The New York Times, in which she expresses regret over how certain career choices affected her personal life.

“Since I resigned my position as chief financial officer of Lehman Brothers in 2008, amid mounting chaos and a cloud of public humiliation only months before the company went bankrupt, I have had ample time to reflect on the decisions I made in balancing (or filing to balance) my job with the rest of my life,” Ms. Callan writes. “I didn’t start out with the goal of devoting all of myself to my job. It crept in over time,” she continues. “Inevitably, when I left my job, it devastated me. I couldn’t just rally and move on.”

“I have often wondered whether I would have been asked to be C.F.O. if I had not worked the way that I did. Until recently, I thought my singular focus on my career was the most powerful ingredient in my success. But I am beginning to realize that I sold myself short.” She goes on: “I have also wondered where I would be today if Lehman Brothers hadn’t collapsed. In 2007, I did start to have my doubts about the way I was living my life. Or not really living it. But I felt locked in to my career.”

BRITISH PROPOSAL TO CURB RISK IS FAULTED  |  Proposed legislation to protect Britain’s financial services sector from futu! re crises! does not go far enough and may fail to stop banks from engaging in risky trading, British lawmakers warned in a report on Monday, DealBook’s Mark Scott reports. “The warning comes as Parliament is set to debate the new laws, which outline how firms could be split up if they do not separate their investment banking units from their retail banking operations.”

“The creation of a so-called ring fence between the banks’ businesses is an attempt to shield consumers from an implosion of trading activity and other risky behavior that led to several big banks being bailed out by British taxpayers during the financial crisis.”

ON THE AGENDA  |  Diamond Foods and Urban Outfitters report earnings after the market closes. Stephen A. Schwarzman of the Blackstone Goup is on CNBC at 11 a.m. Alexandra Lebenthal, chief executive of Lebenthal & Company, is on CNBC at 5 p.m.

MARKS WARNS OF A CREDIT BUBBLE  |  Howard Marks, the co-founder and chairman of Oaktree Capital Management, is a celebrity in financial circles, writing memos that are read by the likes of Warren E. Buffett. An expert in distressed debt, Mr. Marks tells Barron’s that he detects signs of a new credit bubble in its “fifth inning.” Debt issuance is soaring as investors are “acting bullish, if not thinking bullish,” Mr. Marks says. Barron’s writes: “Does it all spell a disaster in the making Probably not, he avers. The much-feared eventual rise in interest rates, which doomsday forecasters say could crush bonds, would likely res! ult from ! an improvement in the economy, he reasons. That alone would mitigate against a smashup in, say, the junk-bond market, as defaults would remain at minimal levels.”

WEIGHING THE RETURN OF MEGADEALS  |  Is the increasing number of big deals a sign of strength or simply a way for deal makers to get rich Four experts debate the issue in The New York Times’s Room for Debate. Steven M. Davidoff, DealBook’s Deal Professor, argues that “companies that do deals will be forced by the economy to soberly assess the risk and not get in over the heads.”

But that is often not enough to prevent lawsuits. A yearly report “shows that last year, 92 percent of all transactions with a value greater than $100 million experienced litigation,” Mr. Davidoff wrote in the Deal Professor column on Friday. “It is understandable that the knee-jerk reaction is that this litigation is bad and needs to stop. However, merger litigation can have real value.”

Mergers & Acquisitions »

Alibaba Names New Leader  |  Jonathan Lu, executive vice president of Alibaba Group Holding, has been named the new chief executive of the Chinese e-commerce company, succeeding Jack Ma. WALL STREET JOURNAL

What Would a Deal for Bed Bath & Beyond Look Like!  |  While there is no indication that Bed Bath & Beyond is looking to sell itself, a hypothetical buyer might pay “$85 a share â€" roughly 10 times this fiscal year’s projected earnings before interest, taxes, depreciation, and amortization (Ebitda) â€" consistent with prices paid for other quality companies, versus Bed Bath & Beyond’s current modest valuation of 6.5 times,” Barron’s writes. BARRON’S

Sycamore Turns Heads With Its Retail Shopping Spree  |  Stefan Kaluzny, who started the buyout firm Sycamore Partners just two years ago, has made a couple of splashy purchases, including the $600 million deal for the retail chain Hot Topic. DealBook »

Sony’s Chairman Announces Retirement  |  Howard Stringer, who was the first foreign president of Sony, announced on Friday that he would retire as chairman in June. ASSOCIATED PRESS

Temasek Said to Agree to Buy Stake in Evonik of Germany  | 
REUTERS

INVESTMENT BANKING »

!

Rebound in Employment Fuels Wall Street Rally  |  The New York Times writes: “Less than a week since the Dow Jones industrial average hit its all-time high, the broader Standard & Poor’s 500-stock index is on track to surpass its own 2007 high. The reason, in no small part, is because of investor confidence in the growing economic strength of American households.” NEW YORK TIMES

A Bad Year in Britain for Banks, Not Bankers  |  The disclosures this week by Barclays, Royal Bank of Scotland and HSBC add to the growing debate over outsized pay packages among bankers. DealBok »

Goldman Can Lead the Way for Wall Street  |  “If chief executive officer Lloyd Blankfein really wants to shake up the industry, Goldman Sachs should break further from what remains of the Wall Street pack, and act like the leader it is. It needs a revamped compensation system that rewards people for taking prudent risks and penalizes those who take foolish ones,” William D. Cohan writes in Bloomberg View. BLOOMBERG NEWS

For European Pay Packages, Back to the Drawing Board  |  Banks in Europe are rushing to revise pay packages ahead of upcoming annual meetings, in light of new rules, The Financial Times writes. FINANCIAL TIMES

N.Y.S.E. Prepares New Disaster Plan  | 
WALL STREET JOURNAL

PRIVATE EQUITY »

Rival Bidders Emerge for Hostess Assets  |  The New York Post reports: “Hostess creditor Silver Point Capital in the last few days has submitted a letter to Hostess’s bankers expressing interest in buying all or part of the Hostess business, a source said. What’s mor, Hurst Capital, a hedge-fund newcomer that wasn’t seen as much of a contender initially, has formed a partnership with other private-equity firms to make an offer, the source said.” NEW YORK POST

Cerberus Plans to Increase Stake in Seibu of Japan  | 
REUTERS

HEDGE FUNDS »

Paulson Said to Consider Moving to Puerto Rico  |  Bloomberg News reports: “John Paulson, a lifelong New Yorker, is exploring a move to Puerto Rico, where a new law would elim! inate tax! es on gains from the $9.5 billion he has invested in his own hedge funds, according to four people who have spoken to him about a possible relocation.” BLOOMBERG NEWS

Re-examining Board Priorities in an Era of Activism  |  As corporate boards have to steer companies owned by both long- and short-term shareholders, new ideas are needed to figure out how to cater to all constituencies, the lawyer Ira M. Millstein writes in the Another View column. DealBook »

J.C. Penney’s Self-Inflicted Problem  |  With the apparent support of William A. Ackmn, J.C. Penney lured Martha Stewart away from Macy’s, inciting a contract dispute. The New York Times columnist James B. Stewart writes that while the fight may not be Penney’s biggest headache, “it’s a purely self-inflicted one.” NEW YORK TIMES

I.P.O./OFFERINGS »

CVC-Led Group to Sell $1.4 Billion Stake in Retailer  |  The private equity group CVC Capital Partners is leading the sale of a 40 percent stake in Indonesia’s Matahari Department Store that is expected to raise up to $1.36 billion, according to a term sheet. DealBook »

Sandberg on ’60 Minutes’  |  Sheryl Sandberg, Facebook’s chief operating officer, discusses the ideas in her new book about women in the workplace, “Lean In.” CBS NEWS

VENTURE CAPITAL »

For Start-Ups, Creative Learning Is Lucrative  |  “While companies like Udacity and Coursera â€" providers of giant online open courses â€" are just beginning to introduce courses with fees that count for academic credit, other online learning companies have carved out a lucrative niche in courses on design, potography and other creative pursuits,” The New York Times writes. NEW YORK TIMES

How an Internet Entrepreneur Downsized His Life  | 
NEW YORK TIMES

LEGAL/REGULATORY »

German Financier Is Found and Jailed in Fraud  |  The New York Times reports: “Florian Homm, a flamboyant former hedge fund manager who spent the last five years in hiding, was arrested in Italy and faces extradition ! to the Un! ited States on securities fraud charges which could expose him to a lengthy prison sentence, the Federal Bureau of Investigation said.” NEW YORK TIMES

Intrade Abruptly Ceases Trading Activity  |  The online prediction market Intrade said it would shut down trading activity “due to circumstances recently discovered,” which “require immediate further investigation.” INTRADE

Commodity Futures Agency’s General Counsel to Depart  |  The Commodity Futures Trading Commission announced on Friday that its general counsel, Dan M. Berkovitz, would soon depart. Hi exit comes after the agency’s recent legal crackdown on Wall Street. DealBook »

Examining White’s Record as Prosecutor of Financial Cases  |  The New York Times columnist Gretchen Morgenson writes that questions still hang over some of the financial cases that came across the desk of Mary Jo White, President Obama’s choice to lead the Securities and Exchange Commission, while she was a federal prosecutor. NEW YORK TIMES

Finance Remains a Complex, Interconnected World  |  For one thing, Stephen J. Lubben writes in the In Debt column, wh! at is an ! emerging markets fund doing buying protection in the form of credit default swaps against France DealBook »

At the S.E.C., a Revolving Door That Helps the Public  |  The so-called revolving door between private sector and government posts means that law enforcement officials have some firsthand knowledge of how the industry they regulate works, David Zaring, assistant professor of legal studies at the Wharton School of Business at the University of Pennsylvania, writes in the Another View column. DealBook »